Student Loans and Repayment Strategies Prepared for the Graduating Class of 2019 Presenter s name:gloria Salinas Presenter s title: Assistant Director, Financial Aid, UT Health San Antonio Spring 2019 Disclaimer: All information and estimates are based on AAMC interpretation of federal regulations as of January 2019 and are subject to change. These are estimates only. Students should contact their servicer(s) to discuss exact loan balances and repayment options.
Required Online Exit Students are still required to complete the online Department of Education Loan Exit session at studentloans.gov
Why Do I Need to Know This? 3
Oh, That s Why! 4
Agenda Know Your Loans What Happens After Graduation Repayment Plans How Repayment Looks in Residency Other Considerations 5
Free Online Resource (PDF Download) Education Debt Manager (EDM) aamc.org/first/edm 6
Download Your Free PDF Education Debt Manager Booklet
Know Your Loan Portfolio 8
Class of 2018 Indebtedness Median MD School Debt: $200,000 PUBLIC PRIVATE $180,000 $202,000 Source: AAMC 2018 Graduate Questionnaire (GQ) 75% of class report having educational debt 48% report debt of $200,000 or higher 9
Master Promissory Note Is a contract with the lender Has a multi-loan feature Details terms and conditions Includes rights & responsibilities 10
Rights and Responsibilities Prepay any federal loan without penalty Change repayment plans Request a deferment or forbearance Request a shorter repayment schedule Review the promissory note for all rights 11
Rights and Responsibilities Make on time loan payments Make payments despite non-receipt of bill Notify servicer if contact information changes Complete exit counseling Review promissory note for all responsibilities 12
A Serious Obligation Manage your Manage debt - your don t debt let it manage don t let you it manage you Student loans must be repaid 13
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Loan Discharge 15
Finding Your Federal Loans To access, provide your FSA ID, including : Username & Password For questions, visit https://fsaid.ed.gov nslds.ed.gov 16
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Subsidized Loans vs. Unsubsidized Loans Subsidized Direct Subsidized Perkins Loans* Primary Care Loans Loans for Disadvantaged Students (LDS)* Institutional Loans (some) Consolidation Loans (underlying subsidized loans) Unsubsidized Direct Unsubsidized Direct PLUS Private Loans Institutional Loans (some) Consolidation Loans (underlying unsubsidized loans) * Subsidy and deferment rights are lost in a consolidation loan 19
Fixed Interest Rates for the Class of 2019 M1 2015-16 M2 2016-17 M3 2017-18 M4 2018-19 PERKINS* 5.0% PERKINS* 5.0% PERKINS* 5.0% PERKINS* 5.0% DIRECT UNSUBSIDIZED 5.84% DIRECT UNSUBSIDIZED 5.31% DIRECT UNSUBSIDIZED 6.0% DIRECT UNSUBSIDIZED 6.6% DIRECT PLUS 6.84% DIRECT PLUS 6.31% DIRECT PLUS 7.0% DIRECT PLUS 7.6% * Perkins, PCL and LDS Loans are disbursed at a fixed rate of 5%. All loans shown have a fixed interest rate. 20
Capitalization Addition of unpaid interest to the principal $200,000 $231,400 $31,400 Principal + Interest = Larger Principal 21
Repayment Tip When Sending a Voluntary Payment 1) Send as a Separate Payment - Instruct servicer to APPLY NOW - Specify WHERE to apply it (high interest rate loans are the priority) 2) Verify Payment was Applied Accurately Pay the interest on your loans before they capitalize when possible. 22
After Graduation 23
Your Official Last Day of Attendance April 26, 2019 24
Loan Repayment Timeline The path for many federal student loans 25
When are the First Payments Due? aamc.org/first/timeline 26
Postponement Options Contact the loan servicer to apply - Request 30-days before needed - Forbearance Forbearance Deferment Deferment 27
Postponement Options Subsidized loans are interest free Interest accrues on unsubsidized loans Contact each loan servicer to apply Strict requirements to qualify NOTE: For more details, or to request a deferment or forbearance, contact each loan servicer 28
Postponement Options Interest accrues on all loans Interest will capitalize Contact each loan servicer to apply Request 30-days before needed NOTE: For more details, or to request a deferment or forbearance, contact each loan servicer 29
Postponement Options Medical Residency Forbearance Postpones payments in annual increments Capitalization may occur at end of residency (if increments occur back-to-back throughout residency) An option for medical residents/interns NOTE: Request increments in a timely manner to avoid unnecessary and additional capitalization. 30
Repayment Plans 31
STOP 32
Education Debt Manger Booklet Key Pages to Review 32-38 Repayment Plans Compared, Monthly Payment Estimator 33
Monthly Payment Estimator aamc.org/first/estimator 34
Managing Loans During Residency The Impact of Popular Management Strategies 35
Debt Fact The lower the monthly payment, the higher the overall cost 36
Repayment Plans Traditional Standard Monthly payments for the entire repayment term are calculated up-front Extended and disclosed to you. Graduated 10 Years 25 Years 10 Years $ 2,600/mo $ 1,500/mo $ 1,200/mo Based on total education debt (median) as self-reported by 2018 grads on the GQ survey. 37
Repayment Plans Income-Driven* $740/mo $480/mo $320/mo $320/mo Income-Contingent Repayment (ICR) Income-Based Payments Repayment are based (IBR)* on household income (AGI) Pay As You and family Earn (PAYE) size - recalculated annually. Revised Pay As You Earn (REPAYE) Based on total education debt (median) as self-reported by 2018 grads on the GQ survey, a PGY1 stipend of $556,800 and a family size of 1. * New Borrowers on or after July 1, 2014 that select IBR will receive payment amounts equal to that of PAYE. 38
What s the Catch? How are these payments possible? 39
We will briefly compare plans based on -Payment Amounts -Payment Limits -Term Length -Eligible Loans -Financial Need -Borrower Eligibility -Interest Subsidy 40
Income-Driven Repayment (IDR) Plans ICR IBR PAYE 20% 15% 10% Different Payment Amounts REPAYE 10% 41
IDR Plans: Payments ICR IBR PAYE No Max Max Max Different Payment Limits REPAYE No Max 42
IDR Plans: Terms ICR IBR PAYE REPAYE 25 years 25 Plans years 20 years 25 years Different Term Lengths 43
IDR Plans Eligibility: Eligible Loans ICR IBR Eligible Loans Eligible Loans Perkins and LDS loans are not eligible unless included in a Direct Consolidation Loan PAYE Eligible Loans REPAYE Eligible Loans 44
IDR Plans Eligibility: Financial Need ICR Eligible Loans Must have a Partial Financial Hardship (PFH) IBR Eligible Loans Show Need PAYE Eligible Loans Show Need REPAYE Eligible Loans 45
The Test for a PFH Partial Financial Hardship (PFH) Standard $2,600 / mo Payment > $480 PAYE (IBR) or or IBR $320 Payment (PAYE) Must have PFH to enter into IBR or PAYE Can remain in IBR or PAYE in subsequent years, even without a PFH Must submit annual documentation Max payment in IBR or PAYE is the Standard amount (determined when entering the plan) Based on indebtedness of 200K with a PGY1 stipend of $56,800 and a family size of one. 46
IDR Plan Eligibility: New Borrowers Only ICR Eligible Loans IBR Eligible Loans Show Need PAYE Eligible Loans Show Need NEW Borrower REPAYE Eligible Loans Must be a new borrower 47
New Borrower Defined Two Requirements 1) No outstanding loans on October 1, 2007 or paid-off all outstanding loans before receiving a new loan on or after 10/1/07 AND 2) Received a Direct Loan disbursement on/after October 1, 2011 48
Interest Benefit ICR None IBR PAYE REPAYE If your monthly payment doesn't cover the full amount of interest that accrues on your subsidized loans, the government pays the difference for the first three years If your monthly payment doesn t cover the full amount of interest that accrues, the government pays the full amount of the difference on your subsidized loans for the first three years, and half of the difference after the first three years, and half of the difference on your unsubsidized loans during all periods 49
How to Know Your Best Strategy It s not about the best one It s about what fits with your life and financial goals 50
Decision Time: 6 Months Post-Graduation Make Payments PAYE REPAYE IBR Postpone Payments Medical Residency Forbearance 51
Which Option to Choose? 52
The FIRST Stop A tool for graduates!! MedLoans Organizer and Calculator (MLOC) aamc.org/medloans 53
Other Considerations 54
Public Service Loan Forgiveness (PSLF) Eligible Loans + + Qualifying Payments Qualifying Work Public Service Loan Forgiveness myfedloan.org 55
aamc.org/first/pslfeligibility 56
Public Service Loan Forgiveness aamc.org/first/pslfbooklet 57
Loan Forgiveness & Repay Assistance aamc.org/stloan aamc.org/stloan aamc.org/repayasst 58
Reasons to Consolidate Reduce # of Servicers Eligibility for PAYE or REPAYE Eligibility for IBR Eligibility for PSLF 59
Should You Consolidate? aamc.org/first/consolidatequiz 60
Should I Refinance? aamc.org/first/shouldirefinance 61
Taxpayer Relief Act of 1997* Full Deduction Single $65,000 or less Married filing Jointly $135,000 or less Partial Deduction $65,001 to $79,999 $135,001 to $164,999 NO Deduction $80,000 or more $165,000 or more Max student loan interest deduction: $2,500/year May be eligible: Voluntary payments & capitalization * Source: IRS Publication 970, January 2018. irs.gov/publications/p970 62
Considering Buying a House Students are strongly encouraged to watch this recorded webinar to help them understand their options as graduating medical students when considering buying a home. 2018 Home Financing for Students and Resident presented by PhysicianLoans and hosted by AAMC https://youtu.be/qcau-lodri0 63
aamc.org/nextsteps 64
Support Along The Way feedback.studentaid.ed.gov aamc.org/advocacy/meded Financial Aid Office & Residency Programs MedLoans Organizer & Calculator aamc.org/medloans aamc.org/financialwellness studentloans.gov 65
101 Sessions Appointments for one-on-one sessions are available at Veteran Services and Financial Aid for students that have completed the online StudentLoans.gov exit counseling. The purpose of this session is to help students better understand their loan portfolio, next steps, and where to find additional resources to formulate their own debt management strategy. Call 210 567 2635 after March 27, 2019 to schedule your session. 66
An investment in knowledge always pays the best interest 67